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Memo- 2008 Legislative Delegation Discussion & 2008 Legislative Issues & PrioritiesADMINISTRATIVE SERVICES: OFFICE OF THE CITY MANAGER MEMORANDUM TO: Honorable Mayor and Members of the CitA Council FROM: Rick Getschow, Hopkins City Manager MEETING DATE: February 12, 2008 k vt SUBJECT: Legislative Delegation Discussion and 2008 Legislative Issues and Priorities Background: State Senator Ron Latz and State Representative Steve Simon are scheduled to be in attendance at the City Council work session to discuss the upcoming 2008 legislative session. Staff felt that it was important to provide a legislative agenda that includes a list of issues or concerns that we feel should be made known to the City Council and our legislators. This allows for the Council and staff to speak as one voice on city issues of legislative concern. The enclosed list is currently a draft. It may not cover all of the items that may arise at the legislature whereby the City and other city associations may become involved, but it does attempt to highlight the larger issues that may be at the forefront of the 2008 session. Also, many of the items of general and regional interest, such as levy limits and housing policies, were taken from the legislative polices of the Association of Metropolitan Municipalities (Metro Cities) and the League of Minnesota Cities (LMC)- of which we are a member. There will no doubt be other areas of discussion with our legislative delegation, but the enclosed agenda allows us to have a framework from which to discuss major topics. In addition to our meeting with the legislators, the Council is being asked to review this list and edit or add any additional issues as necessary prior to the agenda being distributed to all legislators and other interested community groups and organizations. I have also included more specific information on two topics — transportation and LGA. The City of Fridley has taken on the lead role on behalf of several inner -ring suburbs regarding the distribution of LGA. They are proposing to introduce new legislation for overhauling the LGA formula. Enclosed in the packet is more specific information on the proposed bill and a draft resolution asking for Hopkins City Council support. In the area of transportation, the LMC have asked for cities to pass a resolution of support regarding transportation funding for the upcoming session. This is in response to a resolution that the House majority leader was proposing. Staff is inclined to support the LMC resolution, as opposed to the House resolution as it is more in line with our stance on transportation. Both resolutions are included in the packet. Both the LGA resolution and a transportation funding resolution could be approved at the February 19 City Council meeting following this work session discussion. Enclosures: 1. Draft 2008 Legislative Agenda 2. LGA Information 3. Proposed Transportation Resolution(s) City of 11opkims 2008 LEGISLATIVE ISSUES AND CONCERNS TIF DISTRICT 2 -11 LEGISLATION In 2003, the Legislature passed Chapter 127, Article 10, Section 31 of Laws of Minnesota 2003 relating to District 2 -11. This law did two things that the City had requested. First, it allowed the City to extend the term of the TIF district by an additional four years. Second, it extended by four years the requirements of Minnesota Statutes, section 469.1763, subdivision 3, that activities must be undertaken within a five -year period from the date of certification of the tax increment financing district. However, the special legislation also did something that the City had not requested. Subdivision 1(b) of the law provided that upon approval of the law by the City no tax increment could be spent on activities outside of the district, other than for administrative expenses. Normally, tax increment authorities have a limited ability to spend a certain percentage of tax increment outside of the tax increment district so long as other restrictions on the use of tax increment are followed. The proposed special legislation would repeal subdivision 1(b) of the 2003 law and allow the expenditure of tax increment outside of the district, subject to the same restrictions that apply to other tax increment districts. SOUTHWEST LIGHT RAIL TRANSITWAY The Twin Cities Metropolitan Area needs a multi -modal regional transit system that serves both commuters and the transit dependent. The transit system should be composed of a mix of HOV lanes, express and regular route bus service, exclusive transit ways, light rail transit and commuter rail corridors designed to connect residential, employment, retail and entertainment centers. The system should be regularly monitored and adjusted to ensure that routes of service correspond to the region's changing travel patterns. In order to slow the growth in congestion and provide regional residents and visitors with a realistic alternative to the automobile, the regional transit system needs a funding source that is both stable and capable of growing with the region. An important part of the regional system is the proposed southwest light rail transitway. The City of Hopkins strongly supports this project and its classification as a Tier One transitway as defined by the federal government and Metro Transit. TRANSPORATATION AND TRANSIT FUNDING ISSUES The City of Hopkins strongly supports increased funding for transit and highways, both of which are a critical need in the metropolitan area. In addition, funding for mass transit, including transit ways, light rail or heavy rail in existing corridors, should be dedicated in a manner consistent with current highway funding. Funds allocated to the metropolitan area should be flexible so that the most efficient and cost effective transportation solutions may be chosen and the main metropolitan problem of congestion relief can be addressed. For the purpose of accelerating road and transit construction projects in the metro area, the City of Hopkins supports the following list of revenue raising options in any combination, provided there is no corresponding offset to negate any actual new revenue that has the political and financial viability to produce improved roads and transit. • Gas Tax • Additional Highway Bonding • License Tab Fee Restoration • Motor Vehicle Sales Tax Increase • Wheelage Tax • Street Utility Fee • Road Access Fee • Sales Tax The City also supports the statutory dedication of MVST on leased vehicles to be dedicated 100% to transportation and transit. The City will oppose any reduction in existing dollars to fund transportation as a result of the dedication of MVST dollars for transportation purposes. Finally, the City of Hopkins needs increased revenues to support the two street systems we own and maintain- the Municipal State Aid system (MSA) and local street (residential) system. MNDOT MAINTENANCE BUDGET The Minnesota Department of Transportation's maintenance budget has been reduced in recent years due to a lack of state funding and as a result state right of ways, roadways, and state owned parcels are not being adequately maintained. As a result, municipalities are spending local dollars maintaining these properties, many of which are deteriorating at an accelerated rate. The City of Hopkins supports fully funding MnDOT's maintenance budget to relieve the financial burden on local units of government and to assure that state highways do not deteriorate prematurely. 2 LEVY LIMITS The City of Hopkins strongly opposes levy limits and urges the legislature to not re -enact them. We also oppose the imposition of artificial mechanisms such as valuation freezes, payroll freezes, reverse referenda, super majority requirements for levy, or other limitations to the local government budget and taxing process. Expenditures for capital improvements such as infrastructure reconstruction should also not be subject to levy limits. LOCAL GOVERNMENT AID (LGA) Local Government Aid (LGA), the only remaining form of general purpose state aid to Minnesota cities, has been systematically reduced and modified by previous legislatures, at a significant cost to most metropolitan communities. As a result of these changes a majority of the metropolitan area's 183 cities no longer receive any LGA. • The City of Hopkins supports the restoration of previous LGA cuts to fully fund the current LGA formula. • The City of Hopkins supports the distribution of LGA in a manner that assists those cities whose public service needs and costs exceed their ability to pay. • The City of Hopkins supports modifications to the current LGA formula that more adequately measures these needs and abilities to pay than does the current formula. • The City of Hopkins supports the development of a new LGA formula that addresses current problems of volatility with year -to -year LGA distributions. • The City of Hopkins recognizes that any new LGA formula must fairly represent the public service needs and costs of older, first ring suburbs. • The City of Hopkins supports the inclusion of inflationary factors in any formula. LIMITED MARKET VALUE AND HOMESTEAD TAX BURDENS The 2001 Legislature enacted a phase -out of the state's limited market value (LMV) system. Under the LMV system, homeowners and cabin owners who experience rapid escalation in their property's value effectively have a temporary exemption of taxes on a portion of that growth. This exemption has grown rapidly over the past several years and now shifts substantial property tax burdens to other types of property. In 2005, the Legislature delayed the phase -out by extending the program for two additional years due to concerns that a rapid phase -out of the program could dramatically shift tax burdens back to homes and cabins. The most recent data on the LMV program show that most of the benefit goes to agricultural and cabin property owners. 3 The LMV program should be allowed to sunset. The state should buffer property tax increases on homeowners by increasing the circuit breaker and targeting programs. The Legislature should also convert the circuit breaker and targeting into automatic refunds to qualifying taxpayers. SALES TAX ON LOCAL GOVERNMENT PURCHASES The Legislature should reinstate the sales tax exemption for all local government purchases without requiring a reduction in other aids. RESIDENTIAL CARE FACILITIES (GROUP HOMES) Sufficient funding and oversight is needed to ensure that residents living in residential care facilities have appropriate care and supervision, and that neighborhoods are not disproportionately impacted by high concentrations of residential care facilities. Under current law, operators of certain residential care facilities are not required to notify cities when they intend to purchase single - family housing for this purpose. And cities do not have authority to regulate the locations of group homes and residential care facilities. Cities have reasonable concerns about the safety of group home residents, particularly in case of public safety emergencies. Cities also have an interest in preserving a balance in residential neighborhoods between group homes and other uses. Cities should have statutory authority to require agencies and licensed providers that operate residential care facilities to notify the city of properties being operated as residential care facilities. The Legislature should also require establishment of non - concentration standards for residential care facilities to prevent clustering. Finally, licensing authorities must be responsible for removing any residents incapable of living in such an environment, particularly if they become a danger to themselves or others. IMMIGRATION REFORM The United States and the State of Minnesota have long traditions of welcoming immigrants. Immigrants strengthen Minnesota by contributing to the state's economy, enhancing cultural resources, and participating in efforts to build strong communities. According to recent census data, the City of Hopkins has the third highest percentage of residents that are foreign -born in the Twin Cities next to Minneapolis and Saint Paul. Since immigrants are barred from most federal public assistance, the burden of providing social services, education, and health care falls to state and local governments that are increasingly feeling the financial impact of both legal and illegal immigrants living in their communities. The City of Hopkins, in conjunction with the League of Minnesota Cities and the National League of Cities, urges Congress to move quickly to enact and enforce effective immigration laws. Federal and state governments must not transfer responsibility for El enforcing U.S. immigration laws to local personnel, including police officers, firefighters, educators, health professionals, and social service employees. Finally, federal and state governments must not prohibit local units of government from implementing policies aimed at fostering positive relationships between local government officials, including law enforcement personnel, and immigrant communities TELECOMMUNICATIONS Local residents, subscribers to cable /video services, the Federal Communications Commission (FCC), and state and federal lawmakers have signaled growing interest and support for measures to spur increased direct competition in the delivery of advanced video and telecommunications services at the local level. In recent years, increasing numbers of telecommunications service providers have begun offering competitive video services and claim that local franchising can be a barrier to entry. The City of Hopkins strongly disagree with that viewpoint, and maintain there is no evidence that local franchising is a barrier to competitive entry. Local franchising authorities have promoted the benefits of competition and development of innovative services as a primary source for deployment of broadband technology. In pursuing the goal of providing increased consumer choice, city officials look for opportunities to encourage competitive entry while ensuring community needs and interests are met. Accordingly, the Legislature, FCC, and Congress should recognize, support, and maintain flexible exercise of local franchising authority to encourage increased competition between incumbent cable system operators and new wireline competitive video service providers. Fundamental reasons for retaining local franchise authority include: • Consumer protection and enforcement of quality of service standards and local accountability. • Assessment and delivery of services to meet community needs and interests. • Provision of channel capacity and related equipment, facilities, and other support of public, educational, and government (PEG) use of that capacity. • Production and development of diverse programming. • Effective control and management of public rights -of -way. • Provision of institutional networks (I -Nets) to service important community needs, such as public safety communications, libraries, schools, and other public institutions with access to state -of -the -art applications and the ability to communicate effectively with their constituencies. 5 Maintaining local franchising also most effectively creates and preserves agreements that guarantee broad access to services throughout the community, ensuring there is no digital divide for access to available additional services such as access to IP voice and high- speed Internet via infrastructure that delivers video programming services. AFFORDABLE HOUSING- STATE ROLE Primarily through the programs of the Minnesota Housing Finance Agency (MHFA), the state establishes general direction and prioritization of housing issues. The state financially supports a variety of housing types including homeless shelters, transitional housing, supportive housing, senior housing, and family housing. The state must continue to be an active partner in addressing lifecycle and affordable housing issues. AFFORDBALE HOUSING- FEDERAL ROLE The City of Hopkins encourages the federal government to maintain and increase current levels of funding for affordable housing. Federal investment in affordable housing will increase the supply of affordable and life cycle housing as well as increase the inter - jurisdictional collaboration between the two levels of government. Federal funding plays a critical role in aiding states and local governments in their efforts to maintain and increase affordable housing throughout the state. The City strongly encourages the following: To preserve and increase funding for the Community Development Block Grant Program, which is a catalyst for creating more affordable housing; To create and implement a more streamlined procedural method for local units of government to participate and access federal funding and services dealing with grants, loans, and tax incentive programs for economic and community development efforts; and To commit resources to Section 8 funding. It is a flexible, cost effective, and successful program that has helped nearly two million families find housing through promotion of self - sufficiency and stability. REDEVELOPMENT Redevelopment allows local communities to adjust to changing market conditions, better utilize existing public infrastructure, and maintain a viable local tax base. However, due to the higher up -front costs of redevelopment, as compared to greenfield development, desirable redevelopment projects often require public assistance. It should be the goal of the state Legislature to champion development and redevelopment throughout the state by providing enough sustainable funding to assure that the state remains competitive in a global marketplace. The City of Hopkins supports: Co • Increased funding in the Livable Communities Demonstration Account in order to assist communities with development that may not be exclusively market driven or market proven in their particular location; • Increased funding for the Contamination Cleanup Grant Account; • Increased funding for the Metropolitan Council Tax Base Revitalization Program; • Continued funding for the Minnesota Investment Fund; • Continued funding for the Urban Initiative Program; • New funding for a transit related development and redevelopment grant program to better leverage existing programs in areas that are, or will be served by transit projects. • Increased and sustained funding of a redevelopment fund, administered by the Department of Employment and Economic Development (DEED), dedicated to Metropolitan Area projects. • Increased, flexible and sustained funding for the Contamination Cleanup Account for cleanup of polluted land and the recycling of previously developed land. EMINENT DOMAIN Eminent domain reform actions of the 2006 Legislature resulted in a significant philosophical and legal shift in Minnesota. Whereas prior to 2006, Minnesota law provided extensive deference to local governments, statutory changes enacted in 2006 provide significantly greater deference to property owners. Eminent domain actions for traditional public uses such as streets, parks or sewers will cost more. And except for the most extreme cases of blight or contamination, eminent domain for redevelopment purposes will be nearly impossible at any cost. The proper operation and long term economic vitality of our cities is dependent on the ability of the city, its citizens and its businesses to continually reinvest and reinvent. Reinvestment and reinvention strategies can occasionally conflict with the priorities of individual residents 'or business owners. Eminent domain is a critical tool in the reinvestment and reinvention process and without it; our cities will be allowed to deteriorate to unprecedented levels before the public will be able to react. The City of Hopkins strongly encourages the Governor and Minnesota Legislature to revisit the 2006 eminent domain reforms to allow local governments to address blight and contamination problems before those conditions become financially impossible to address. Specifically, the legislature should: • Re -write the blight and contamination definitions and standard of review sections to reflect the deterioration conditions that currently exist in the Metro Area. • Allow for the assembly of multiple parcels in order to properly and appropriately redevelop blighted or contaminated sites. 7 • Provide for the ability to acquire land from "holdouts" who will now view a publicly funded project as an opportunity for personal gain at taxpayer expense. • Review the new enhanced compensation provisions to determine whether individuals are inappropriately enriched by the process. MORTGAGE FORECLOSURE Sub -prime mortgages and predatory lending practices have resulted in thousands of mortgage foreclosures throughout the state. Foreclosures are devastating to homeowners and tenants and can be equally devastating to neighborhoods when the presence of vacant housing results in reduced property values and increased crime. The additional public safety and code enforcement costs of managing vacant properties are a financial strain on cities. The City of Hopkins supports the Legislature's efforts to eliminate predatory lending practices. In order to reduce foreclosures among current recipients of sub -prime mortgages, Hopkins supports additional legislation, including technical changes to the foreclosure process, increased financial support for mortgage foreclosure prevention activities, and financial assistance to individuals. As solutions to address vacant housing are developed, we urge the Legislature to partner with cities and the private sector to adopt and implement those solutions. METROPOLITAN COUNCIL HOUSING TARGETS In advance of the 2008 Comprehensive Plan deadline, and in response to projected growth in the Metro Area, the Metropolitan Council created a methodology to determine how many affordable housing units would be needed and where those units should go. From that process, each metro area city was assigned an affordable housing "target ". Further, Met Council Comprehensive Plan guidance instructs cities to guide sufficient land to accommodate the "targets ". The City of Hopkins supports the creation of affordable and lifecycle housing in the metro area. However, providing affordable and lifecycle housing is a shared responsibility between the private sector and government at all levels, including the federal government, state government and Metropolitan Council. Land economics, construction costs and infrastructure needs create barriers to the creation of affordable housing that cities cannot overcome without assistance. Therefore, the City of Hopkins supports a Metropolitan Council affordable housing policy that recognizes the following tenets: • The Council's housing policies characterize individual city housing numbers as "targets ", not "goals ". E'? Cities need significant financial assistance from the federal and state government, as well as the Metropolitan Council, in order to make progress toward creating additional affordable housing. Improved transportation infrastructure and transit service is required to make progress toward creating affordable housing. Absent significant resources to assist cities, the Met Council will not hold cities responsible if the "targets" can't be met. THIS OLD HOUSE/ THIS OLD SHOP The City of Hopkins supports the reenactment of the "This Old House" law, which allowed owners of older homestead property to defer an increase in their tax capacity resulting from repairs or improvements to the home. The City of Hopkins also supports passage of similar legislation for owners of older commercial /industrial property that make improvements that increase the property's market value by at least 12 %. TRAIN SWITCHING YARD IN GLENCOE The Cities of Hopkins, St. Louis Park and Minnetonka are seeking approximately $3 million in funding from Federal, state, local and private entities to relocate the Twin Cities & Western Railroad's train blocking operations to a new facility outside of the cities of Minnetonka, Hopkins and St. Louis Park. The affected cities have recommended that the Twin Cities and Western Railroad's (TC &W) blocking operations be eliminated in St. Louis Park, Hopkins and Minnetonka and relocated to a new switch yard west of the three cities. The TC &W blocking operations generate noise levels that exceed the state of Minnesota nighttime noise standards. In addition, the switching operations cause vibrations and they often disrupt local transportation systems because at -grade crossings are temporarily blocked by trains conducting switching operations. The Glencoe Railroad Congestion Mitigation Project, located in the City of Glencoe, involves constructing four siding tracks to accommodate the anticipated amount of rail car maneuvering/switching operations at this new facility. It is a nine acre site and the City of Glencoe was selected as the preferred site for a switch yard because it would consolidate operations, it would provide for noise mitigation for residents in Glencoe (existing rail car maneuvers would be relocated to the west side of town away from the east side), and it would provide opportunities for economic development. Anticipated project costs of approximately $3,000,000 for the yard include the land acquisition and design costs. Proposed funding sources include $2 million of Federal Funds, $700,000 of state funds, $200,000 from neighboring cities, and $100,000 from private investors. The site will be owned by the McLeod County Rail Authority and operated by TC &W. Z G7YOF FRIDLEY SCOTT J. LUND MAYOR lunds@6 fridley.mn.us www 6fridley.mmus FRIDLEY MUNICIPAL CENTER - 6431 UNIVERSITY AVE. N.E. FRIDLEY, MN 55432 - (763) 571 -3450 - FAX (763) 571 -1287 January 23, 2008 Mayor Gene Maxwell City of Hopkins 1010 First Street South Hopkins, MN 55343 Dear Mayor Maxwell: As you might have heard by now, the City of Fridley has been working with its legislative delegation and others to draft a bill that would revise the LGA formula. In essence, the bill would replace the complicated, five- factor needs portion of the current formula with a new needs indicator that is based on expenditures. The essential features of this legislative proposal are as follows: 1. It would base need on a rolling three -year average that includes operating expenditures and debt service expenditures listed in the three most recent expenditure reports published by the Office of the State Auditor. 2. It would place a 5% cap on the annual growth of this three -year average. 3. It provides that no Minnesota city would receive less than 90% of its 2007 LGA distribution. 4. It would apply to all Minnesota cities rather than continue two different formulas for cities under and over 2,500 in population. 5. It would cost the state an additional $100 million and would come close to returning the total LGA allocation to 2003 levels. The proposal replaces complexity with simplicity, it should eliminate volatility, and it adjusts the imbalance in the current LGA formula that leaves the Minneapolis /St. Paul suburban cities with only 4.8% of the total LGA distribution. Although it continues to juxtapose need and ability to pay, it also recognizes that the suburban portion of Minnesota's population comprises 41 % of the total population and contributes 67% of the State's sales and income taxes. RESIDENCE - 580 — 69TH AVENUE N.E. - FRIDLEY, MINNESOTA 55432 - PHONE (763) 571 -0214 Letter on LGA January 23, 2008 Page 2 Our intent in proposing the legislation is to raise the visibility of the LGA issue and to attempt to build highly visible support for a suburban proposal. Although we hope to gain passage of LGA reform in 2008, we feel we will have succeeded if we are able to get a strong contingent of other suburban cities to support a common suburban LGA cause. To the extent that we are successful in building support for this cause, we will have greatly improved our joint bargaining position vis -a -vis the two core cities and the greater Minnesota cities in future LGA reform efforts. As we seek to gain your support for our LGA reform proposal, we recognize that there are also problems with the ability to pay side of the formula as well as potential problems with other state distribution programs, including those involving schools. While ideally we might deal with all of these problems in one comprehensive package, we also feel that our chances for reform diminish h as the reform becomes more complex. We also firmly believe that nothing will ever get done i we continually take a wait until next year approach, and we strongly oppose any attempts to raise the LGA funding levels without removing the objectionable and unfair needs portion of the existing formula. What are we asking from you? We're asking that you review the proposed legislation and the accompanying distribution tables with your city staff and council. As you do this, we also ask you to consider the increases in property taxes that the absence of a fair LGA distribution has cost and will continue to cost your residents. If you have suggestions for change, we hope you will pass them on to us along with your other comments on our proposal. If you would like to meet and discuss the proposal, I will be happy to meet with you and others from your city. Ultimately, we hope that you will approve the enclosed resolution and contact your legislative delegation in support of this common cause. If members of your delegation would like to be authors of the bill, that opportunity is available. Finally, we ask that you support the proposed change through participation at legislative hearings. As we work with you, we will continue our communications with the LMC, Metro Cities, the Department of Revenue, Pat Dalton at House Research, the members of our legislative delegation, and key legislators on both the House and Senate Tax Committees. Additionally, we will attempt to find media opportunities to raise public awareness of the LGA issue. Thanks for considering this proposal. I look forward to hearing from you. Sincerely, Scott Lund Mayor Enclosures c w /enc: Rick Getschow, City Manager GNOF FRIDLEY FRIDLEY MUNICIPAL CENTER • 6431 UNIVERSITY AVE. N.E. FRIDLEY, MN 55432 (763) 571 -3450 • FAX (763) 571 -1287 • TTD/TTY (763) 572 -3534 January 23, 2008 Rick Getschow, City Manager City of Hopkins 1010 First Street South Hopkins, MN 55343 Dear Rick: Mayor Scott Lund and I have been collaborating on an effort to bring the LGA distribution issue to the attention of suburban mayors and our suburban legislators. There are, no doubt, many obstacles to success, including the fact that our proposal would cost $100 million in a year where there is a sizeable deficit. While neither the money nor the votes may be available to get the bill that we have had drafted passed, I am hopeful that many of you will help by passing the enclosed resolution and by showing suburban support for change. Although the bill may require some modifications, I believe that it has many advantages over the current needs portion of the LGA formula. There is just no way that anyone can adequately tie this existing statistical mumbo jumbo to the financial needs of cities. It also seems counterproductive to continue to try to "tweak" this basically flawed formula. The sooner we establish a formula that has been built with integrity, simplicity, and transparency, the sooner we can make a sound case for additional funding. If you have changes to suggest in the proposed legislation, I welcome your suggestions. Thank you. Sincerely, 9 a William W. Burns City Manager Enclosures